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Cross-holdings, management relationships and Asiasons, Blumont and LionGold becoming ‘designated’ stocks
Kenneth Lim
12 October 2013
If there is one distinctive characteristic among the handful of companies that have been linked to Ipco International and Innopac Holdings - including the three that were suspended by Singapore Exchange (SGX) a week ago - it would be their apparent susceptibility to major disruptions.
If history were an airline, that group of companies would be paying mountains in excess baggage fees.
On Oct 4, SGX suspended the stocks of Asiasons Capital, Blumont Group and LionGold Corp as their shares plunged right out of the gates. SGX allowed trading to resume on Oct 7, but banned short-selling and required upfront cash settlement for those three “designated” stocks.
Add to those three companies Ipco, Innopac, the infamous Mid-Continent Equipment Group and Links Island Holdings, now called Manhattan Resources. What you end up with is a network of cross-holdings and management relationships - and a lot of negative headlines.
The story starts almost 20 years ago, with a Malaysian wheeler and dealer named John Soh Chee Wen, who was known for having amassed a stable of listed companies on both sides of the Causeway. In Singapore, his vehicles were Ipco and what was then called Inno-Pacific Holdings.
The real trouble started in 1998, when rumours began to emerge that Mr Soh - and some of the brokerages he controlled in Malaysia - might be in financial trouble. It reached a point where the Kuala Lumpur Stock Exchange in January 1998 asked all its brokerages to report their exposure to Mr Soh.
Amid those concerns, Ipco in July launched an initial public offering for its Mid-Continent Equipment Group unit. MidCon lasted all of a week before regulators suspended the stock, which was eventually delisted after investigators determined that it had been cornered.
In 1999, Mr Soh resigned as managing director Inno-Pacific, then fled as Malaysia put out a warrant for his arrest. He finally returned to Malaysia years later, and eventually pleaded guilty to abetting acts of fraud related to some trades in Malaysia.
Without Mr Soh at the front, Ipco came under a highly public boardroom fight by a group of shareholders, who succeeded in replacing the board in 1999. Four years later, Ipco’s board would come under another attack, but would prevail.
In early 2000, a company called Links Island Holdings launched its IPO. Six months later, that stock was also suspended on what was eventually found to be a case of share manipulation. It then emerged that Inno-Pacific, through a subsidiary, was the sixth-largest shareholder in Links Island.
A year later, Inno-Pacific had its own boardroom battle, with a number of investors who had links with Mr Soh joining the successful bid to replace Inno-Pacific’s directors.
Back to the present and the three “designated” companies.
Those three companies are linked to Ipco and Innopac through numerous cross-holdings.
Beyond those investment holdings, Ipco company secretary Lynn Ng Su Ling is also non-executive independent director at LionGold and Blumont.
Jared Lim Chih Li, managing director of LionGold substantial shareholder Asiasons Capital, is also married to Dian Lee. Ms Lee runs Clear Water Developments Sdn Bhd, which is a substantial shareholder of Blumont and Innopac.
Regardless of whether those connections are pure coincidence, the market appears to perceive a correlation. Consider the number of trading queries that have been issued by SGX so far this year.
Between Jan 1 and Oct 4 this year, the seven companies mentioned so far, plus Asiasons Capital associate ISR Capital, formed 10 per cent of all the companies queried by SGX, but accounted for 18 per cent - or 16 out of 88 - of queries made.
Such a history can be offputting for some investors.
But Mr Sabnani said that investors should assess every investment based on fundamentals as well as their own risk appetites.
“As an investor you have to look at your own risk appetite,” he said. “Are you looking for yield, are you looking for growth? Every stock, every investment has to be carefully studied.”
History can offer some background, but circumstances can also change.
“History is one thing,” he said. “Sometimes new owners take over and they change the colours.”